MI2-16. Estimating Cost of Equity Capital

Assume that the company's market beta equals -0.8, that the risk-free rate is 5%, and the market return equals 8%. Compute the company's cost of equity capital.

Ml2-20. Estimating Cost of Debt Capital

Assume that a company's financial statements report that its average outstanding debt totals$ L.6 billion, and its total interest expense equals $80 million. If its tax rate is 2 1 %, compute its cost of debt capital.